Shares in Apple (AAPL)-supplier Lumentum Holdings (LITE) have been sailing in calm waters amid volatility in the tech sector. What’s behind the high Relative Strength Rating of LITE stock?
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It just might be the next big thing from Apple.
Apple is widely expected to roll out an augmented reality headset in late 2022 or 2023. AR apps overlay digital imagery onto real-world settings. Facebook parent Meta Platforms (FB) leads in AR headsets, though its shipments are still small.
At Susquehanna, analyst Chris Rolland addressed the AR headset opportunity “over the next few years” for Lumentum in a recent note to clients.
“While still in early development stages, (LITE) management believes high-end AR/VR headsets can feature as many as four to six sensors per system,” Rolland said. “While lower-end models may opt for just one or two sensors per system, the content would still be similar to that of 3D sensing for (smartphones).”
LITE Stock: AR Headsets A New Market?
One question for Lumentum would be whether it would emerge as the long-term leader in shipments of sensors for AR headsets, giving LITE stock a lift.
In the smartphone market, Lumentum was an early supplier of 3D sensors to Apple. Apple uses Lumentum’s 3D sensors in its iPhones to support facial recognition for unlocking screens.
But Apple opted to source 3D sensors from multiple suppliers to keep pricing competitive. II-VI (IIVI), which acquired Finisar, also sells 3D sensors to Apple.
Ming-Chi Kuo, analyst at China-based TF International, estimated that Apple could sell 1 million to 2 million AR headsets in late 2022, according to a report. Kuo estimates that unit sales could climb to 3 million units in 2023, followed by 8 million to 10 million in 2024.
Facebook’s Quest 2 Oculus AR device sells for $300. Apple’s AR headset is expected to be much higher priced.
Lumentum Makes Acquisitions
LITE stock has climbed nearly 24% the last three months, forging a cup-with-handle base. Lumentum stock holds a Relative Strength Rating of 88 out of a best-possible 99, according to IBD Stock Checkup.
While LITE stock trades in a buy zone, investors may want to stay on the sidelines amid volatility in the Nasdaq. Shares were up 2% to 108.25 in afternoon action on the stock market today.
Lumentum has been a consolidator in the fiber-optic components industry. In early November, it announced the acquisition of NeoPhotonics for $900 million. In 2018, Lumentum acquired Oclaro for $1.8 billion.
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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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